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Fake antivirus scams and rogue Internet pharmacies relentlessly seek customers who are willing to trade their credit card numbers for a remedy. Banks and financial institutions become partners in crime when they process payments to fraudsters.

Published research has shown that rogue Internet pharmacies and spam would be much less prevalent and profitable if a few top U.S. financial institutions stopped processing payments for dodgy overseas banks. This is also true for fake antivirus scams, which use misleading security alerts to frighten people into purchasing worthless security software.

Researchers from the University of California, Santa Barbara spent several months infiltrating three of the most popular fake antivirus (fake AV) “affiliate” networks, organized criminal operations that pay hackers to deploy the bunk software. The researchers uncovered a peculiar credit card processing pattern that was common to these scams; a pattern that Visa and MasterCard could use to detect and blacklist fake AV processors.

The pattern reflects each fake AV program’s desire to minimize the threat from “chargebacks,” which occur when consumers dispute a charge. The fake AV networks the UCSB team infiltrated tried to steer unhappy buyers to live customer support agents who could be reached via a toll-free number or online chat. When customers requested a refund, the fake AV firm either ignored the request or granted a refund. If the firm ignored the request, then the buyer could still contact their credit card provider to obtain satisfaction by initiating a chargeback; the credit card network grants a refund to the buyer and then forcibly collects the funds from the firm by reversing the charge.

Excessive chargebacks (more than 2-3 percent of sales) generally raise red flags at Visa and MasterCard, which employ a sliding scale of financial penalties for firms that generate too many chargebacks. But the fake AV companies also don’t want to issue refunds voluntarily if they think a customer won’t take the next step of requesting a chargeback.

The UCSB team found that the fake AV operations sought to maximize profits by altering their refunds according to the chargebacks reported against them, and by refunding just enough to remain below a payment processor’s chargeback limits. Whenever the rate of chargebacks increased, the miscreants would begin issuing more refunds. When the rate of chargebacks subsided, the miscreants would again withhold refunds. Consider the following diagram, from the researchers’ report, which shows a direct and very close correlation between increased chargebacks and heightened refund rates.

The researchers found that fraudsters offered more refunds (dotted line) as chargebacks (red) spiked.